Investments, advisers, and commission

Back in 2001 we invested a substantial (for us) lump sum in a "Prudential Bond" on the recommendation of a financial adviser.

Great fund back then. Much cheaper than the version they have today. I still have a number on my books from that period and not one of the people is unhappy. its one of those products/funds that is unfashionable. not modern and flash and has no bells and whistles in terms of functionality but just does what it is meant to do.

But the most recent statement indicated (for the first time) the adviser listed in the Pru's records.... and it was a company we had never heard of.

Not uncommon. A lot of companies have sub brands or trading names. Some of our agencies are under an old name and some a new name. Some under the old name that merged into ours. Some companies belong to networks/groups and its under the network/group name. Insurers dont often help as they sometimes abbreviate them into meaningless garbage.

Plus, there has been a lot of consolidation of companies over the years. If the book wasnt sold and the company merged into another then its continuation. If you are not a servicing client (i.e. you are not employing the advisers to give you ongoing servicing) then they will never know to contact you. No contact in 17 years is or so doesnt put you on their radar.

In answer to my query the Pru has replied saying that the policy "was taken out through company X [the adviser we had dealt with], however the business was transferred to company Y [financial planners we had never heard of] in 2012. The companies involved.... should have made you aware of the changes."

Not necessarily. Sometimes its a merger or a name change through consolidation. So, a continuation. If there is no commission being paid then you are effectively a transactional client and you wouldnt even be known to them.

I do not see why a company which had, and has, no role in advising us should now be recorded as being "our" advisers.

Being on an agency is not the same as being your advisers. But if you dont want them then get Pru to remove them as agent.

Presumably they are collecting some form of trail commission from the Pru in respect of a policy which they had no part in recommending?

Unlikely but it doesnt matter if they are. It is not at any cost to you.

I would rather that money were not deducted (which I assume it is) from our policy, thereby reducing its growth, to reward a firm who have done nothing to earn it.

That is an incorrect assumption. That isnt how the 2001 pru bond worked.

Can I recoup that money?

There is nothing to recoup as there is nothing you have paid.

and that I wish any ongoing commission they might otherwise pay out to them to remain invested in our policy?

That is not how it works either. If you ask Pru to remove the adviser firm as agent, then Pru will keep any future commission (if any). You are not paying the commission. Its not an explicit charge.

jaybeetoo wrote: »

Somebody has to pay for the commission - surely it can only be the customers of the Pru who are paying for it whether directly or indirectly?

Yes they do. However, the amount paid in commission and the actual charges are not linked like for like. Pru paid the commission.

A fee is explicit. i.e if the fee was £500 then £500 was deducted. Whereas a commission is not explicit. A commission of £500 does not mean £500 was deducted.

Many of these plans had no ongoing attached to them. If they did, it was through a sacrifice of upfront commision. However, in either case, the charges to the investor were exactly the same.

As I said in the bit you quoted, it doesnt matter as there is no cost to investor at this point.

You have a contract with the Pru for them to invest money for you, net of stated charges.
Pru has a contract to pay an adviser commission, based on an agreement you had with an adviser a long time ago.
If you tell Pru that you no longer have an agreement with the adviser and want them to stop paying commission, they will do so.
However, your contract with the Pru does not change and the stated charges remain unchanged.
On the other hand, the Pru now incur lower costs of doing business which will add to their profit.

Thanks to all who have replied. It seems that even if some sort of trail commission is being paid (and according to dunstonh this is not necessarily the case) it is not being deducted directly from my investment but is funded indirectly from the Pru's overall business-management costs. I conclude that I am not being directly penalised and cannot recoup any money. Still means that the arrangements for payment of commission are opaque, though.

Commission ended on new business in 2013. Explicit fees replaced it. Pru's version of the product today is more expensive than the version you have. So, its not all bad. Sometimes the commission system threw up some strange outcomes. We had some Aviva bonds around 2005-2009 which had a negative reduction in yield. i.e. the provider paid you more than you paid charges.

Did make me wonder, though, why the Pru regarded this 'unknown' (to me) company as my adviser.

Terminology differences. Servicing agent. Servicing adviser, servicing company, intermediary etc etc. all variations of a theme. If you had never used an adviser in the first place and bought direct, they would still refer to it as an adviser

In answer to bostonerimus, the product was a Prudence Initial Charge Bond. It is made up of 20 identical policies, all invested in the Pru's Life With Profits fund. We invested a lump sum of £30k in 2001. The documents refer to an "allocation rate" of 102.75% resulting in the original investment being £31,009.95. The documents state that the initial charge was 5% (?), but it's not clear exactly what amount might have been paid to company X for selling us the bond. The latest cash-in valuation is £70,920 (current bond value £47,557, non-guaranteed final bonus £23,363).

I just checked an illustration issued in that period of the same product and the commission disclosure was on page 3 of the 4 page illustration. Ironically, the company name in that illustration was not ours as Pru had our agency name wrong for many years. Pru reconfirmed the amount in the cancellation rights issued at that time.

Not sure how these various figures and % were worked out; but as a savings/investment product, it seems to have done better than some other options... so I have no complaint.

its a yesteryear product but one that has done exactly what you want. i cannot recall anyone being unhappy with one of these from that period. Most other bonds we have moved people off but the Pru ones we leave where they are as they do the job.

Please do not take any notice of people that post to say you could probably do better elsewhere. They dont understand the product and risk level and what it does.